While the start of the North Korea – US Summit is only a week away, there is a short list of possible outcomes that could have market impact in Asia, the US and Europe. Clearly President Trump knows that when he does “deals” with North Korea and China, nothing happens overnight, and to be patient is not only a virtue but a necessity – the Chinese know how to play the Long Game (see our audiovisual presentations).
President Trump now knows that he must lay the groundwork for a long-term relationship with not North Korea, but with Kim Jong Un himself. Mr Kim does not trust the West, especially the US and its allies, Japan, so the Trump Long Game must be in place. Given the changes and signals that are coming out of North Korea and the US, there seems to be a foundation being laid, one in which both Mr Kim and Mr Trump can stand on. Some are saying that the Trump Administration is in hypothesis-mode.
To be clear there have been many examples of Kim’s father, Kim Jong Il and his grandfather, Kim Il-sung, who insincerely worked with previous administrations, as well as Japan and South Korea but seemed to have no intention in making peace. In short, the Kim family received billions of dollars of aid, food, energy and then slammed the door shut. However, Kim Jong Un, is the only one of the three who lived and studied abroad, who lived in Switzerland and built relationships with Germans, Americans, French and Swiss nationals. He seems to have an understanding that he can trust Westerners.
The Trump insistence for “fully verified denuclearization of North Korea” has softened somewhat and the focus seems to be one of taking time, and building a solid relationship with young Kim. Trump now wants to be the peacemaker, as he looks for a “historic push for peace” in the Korean Peninsula.
With regards to the US – China trade talks, there seems to be too many hurdles and landmines in this deal and the likelihood of a deal by March 1, 2019 is closer to zero than we think. This is an issue that will be, like a can kicked down the road, eventually getting done but surely not done in 2019. The trade talks are likely to fall apart or take more time with both sides showing stress. Equity markets as a result suffer.